Figure 4: Using Moving Average with Fibonacci Retracement level

Figure 4 clearly shows that the prevailing trend of Tech Oil & Gas is an uptrend and that the price found support on the 100-day moving average from May 2007 to July 2007 . The next observation is that the price was trading near the 61.8% Fibonacci Retracement level. While the 100-day moving average is supporting the price movement, Fibonacci Retracement is also providing support at the 61.8% level which is about the same price level as the moving average line. Hence the price is said to be very well supported because we have the confluence of two types of analysis, namely moving average and Fibonacci levels,

This article has highlighted the importance of understanding the stock market behavior in order to enhance one's timing of the stock market. A powerful tool such as Fibonacci Retracement is widely used to identify possible support and resistance to the price movement. This helps experienced traders to buy low and sell high. In addition, the usage of the Fibonacci Retracement line together with the concept of support and resistance level and the confluence with the 100-day moving average helps to forecast the possible price movement and increases one’s confidence to take the trade.